Homework Answers
![PV of perpetual cash flows Perpetual cash flow/ Rate of return Perpetual cash flow Rate of return PV of perpetual cash flows $400 10% $4,000 [ $400 / 10%-$400 / 0.10 : $4,000] Formula used is Future Value of a Lumpsum deposit. where FV Future Value PV Present Value r annual interest rate n-number of periods 7 $12,000 9% 15 Investment value in 15 years $43,709.79($12,000 x (1+9%)-$12,000 x 1.09-$43,709.79]](http://img.homeworklib.com/questions/6c5039a0-6f65-11ea-97b2-b117fcb484be.png?x-oss-process=image/resize,w_560)
![Formula used is Present Value of a Lumpsum receipt in future. where, FV-Target Future Value- i Interest Rate n Number of years of deposit PV Present Value today $12,000 9% 15 $ 3,294.46 {$12,000 x [1 / (1 + 9%)^15]-$12,000 x [1 / 1.09^15]-$3,294.46)](http://img.homeworklib.com/questions/6cb253c0-6f65-11ea-946c-bf3f41474585.png?x-oss-process=image/resize,w_560)
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a. A company promises to pay you, and your descendants, $400 per year forever. Your required...
If you are willing to pay $46,850.00 today to receive $4,341.00 per year forever then your...
If you are willing to pay $46,850.00 today to receive $4,341.00 per year forever then your required rate of return must be ____%. Assume the first payment is received one year from today. If you are willing to pay $20,509.00 today to receive a perpetuity with the first payment occurring next year then the payment must be $______. Assume a 7.00% discount rate. What discount rate would make you indifferent between receiving $3,727.00 per year forever and $5,271.00 per year...
If you are willing to pay $44,793.00 today to receive $4,189.00 per year forever then your...
If you are willing to pay $44,793.00 today to receive $4,189.00 per year forever then your required rate of return must be ____%. Assume the first payment is received one year from today. If you are willing to pay $29,453.00 today to receive a perpetuity with the first payment occurring next year then the payment must be $______. Assume a 15.00% discount rate. What discount rate would make you indifferent between receiving $3,526.00 per year forever and $5,610.00 per year...
Suppose you inherit a perpetuity that will pay you $10,000 a year for the rest of...
Suppose you inherit a perpetuity that will pay you $10,000 a year for the rest of your life. You will receive the first $10,000 payment exactly three years from today. The interest rate is 5%. What is the perpetuity worth at the moment you start collecting payments (three years from now) What is the perpetuity worth now? A bank offers to exchange your perpetuity for another stream of yearly payments that also lasts forever but whose first payment will be made...
Please show your work An investment promises to pay you $7,000 per year forever with the...
Please show your work
An investment promises to pay you $7,000 per year forever with the first payment today. If alternative investments of similar risk earn 1% per year, determine the maximum you would be willing to pay for this investment Enter your response below (rounded to 2 decimal places).
A local bank will pay you $99 at the end of each year for your lifetime if you deposit $1,100 in the bank today....
A local bank will pay you $99 at the end of each year for your lifetime if you deposit $1,100 in the bank today. If you plan to live forever, what interest rate is the bank paying? (Enter your answers as a percent rounded to 2 decimal places.) Interest rate
1. What is the value today of receiving $2,422.00 per year forever? Assume the first payment...
1. What is the value today of receiving $2,422.00 per year forever? Assume the first payment is made next year and the discount rate is 12.00%. 2. What is the value today of receiving $1,429.00 per year forever? Assume the first payment is made 6.00 years from today and the discount rate is 4.00%. 3. If you are willing to pay $42,377.00 today to receive $4,353.00 per year forever then your required rate of return must be ____%. Assume the...
14) b) The British government has consol bonds (perpetuities) outstanding that pay £100 per year, forever....
14) b) The British government has consol bonds (perpetuities) outstanding that pay £100 per year, forever. Assume that the current discount rate is 4%. What is the value of the bond today in £, if the last payment was made yesterday? What is the value of the bond today in £, if you will receive the first payment today? Assume an ordinary perpetuity. If this consol trades in the market today at £2,480, what rate of return will an investor...
Assume that Social Security promises you $40,000 per year starting when you retire 45 years from...
Assume that Social Security promises you $40,000 per year
starting when you retire 45 years from today (the first $ 40,000
will get paid 45 years from now). If your discount rate is 7% ,
compounded annually, and you plan to live for 15 years after
retiring (so that you will receive a total of 16 payments including
the first one), what is the value today of Social Security's
promise?
Assume that Social Security promises you $40,000 per year starting...
You have just won $20,000 in the state lottery, which promises to pay you $1,000 (tax...
You have just won $20,000 in the state lottery, which promises to pay you $1,000 (tax free) every year for the next twenty years. The interest rate is 5%. In reality, you receive the first payment of $1,000 today, which is worth today. (Round your response to the nearest penny) The value of the second $1,000 payment is worth Stoday (Round your response to the nearest penny) Your total lottery winnings are actually worth $20,000 to you today
If you are willing to pay $46,868.00 today to receive $4,481.00 per year forever then your...
If you are willing to pay $46,868.00 today to receive $4,481.00 per year forever then your required rate of return must be ____%. Assume the first payment is received one year from today.
Please show your work
An investment promises to pay you $7,000 per year forever with the first payment today. If alternative investments of similar risk earn 1% per year, determine the maximum you would be willing to pay for this investment Enter your response below (rounded to 2 decimal places).
A local bank will pay you $99 at the end of each year for your lifetime if you deposit $1,100 in the bank today. If you plan to live forever, what interest rate is the bank paying? (Enter your answers as a percent rounded to 2 decimal places.) Interest rate
14) b) The British government has consol bonds (perpetuities) outstanding that pay £100 per year, forever. Assume that the current discount rate is 4%. What is the value of the bond today in £, if the last payment was made yesterday? What is the value of the bond today in £, if you will receive the first payment today? Assume an ordinary perpetuity. If this consol trades in the market today at £2,480, what rate of return will an investor...
Assume that Social Security promises you $40,000 per year
starting when you retire 45 years from today (the first $ 40,000
will get paid 45 years from now). If your discount rate is 7% ,
compounded annually, and you plan to live for 15 years after
retiring (so that you will receive a total of 16 payments including
the first one), what is the value today of Social Security's
promise?
Assume that Social Security promises you $40,000 per year starting...
You have just won $20,000 in the state lottery, which promises to pay you $1,000 (tax free) every year for the next twenty years. The interest rate is 5%. In reality, you receive the first payment of $1,000 today, which is worth today. (Round your response to the nearest penny) The value of the second $1,000 payment is worth Stoday (Round your response to the nearest penny) Your total lottery winnings are actually worth $20,000 to you today
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